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An Awesome Business Idea: Link Building for Websites - Part Two

Author Cameron Martel | 19.09.2007 | Category Online Business Ideas

Part Two: Analyzing Expenses vs. Expected Profits

Your link building service wont have too many expenditures. In fact, outside of web hosting and maybe a new computer (since you’ll want something that is fast and reliable), you’re unlikely to have any external expenses at all. For reasons that we’re going to talk about in a bit, link building is a business that you can get started for nearly no up front investment, and your monthly costs are next to nothing.

All of that applies, of course, assuming that you run the show and don’t hire any employees. Expand your business a bit and add a few employees and you’ve really complicated the mix up. However, if you’re doing that, you’re clearly making money (which is the whole point of this thing anyway, right?). Some unique traits related to financial obligations of link building are:

• The link updating service has very low monthly expenses - Your only primary expense (an expense that you must pay in order to maintain the ability to function) is your web hosting. Crucial Web Host only charges $9.99 for a very competitive hosting package, and 1and1.com is even cheaper at $2.99 (though their hosting is much more limited than Crucial’s).

You will be able to market your services for free via related web forums, free classified websites, and viral marketing (more on that in the marketing and promotion article). This means that so long as you do the work yourself, the money that you make goes into your pocket. Nice, huh?

• There are limited secondary expenses - As mentioned earlier, you may use this business as an excuse to invest in a new computer (you can get great deals at Buy.com). Other than that, you won’t be using or purchasing anything that you don’t already need. Basic services, such as a phone or internet connection, are probably already active and running anyway, so you can just use those.

If you plan on expanding down the line and hiring employees you are adding primary expenses, and because of that we won’t talk about them now as a secondary expense. Look for an article to come up in the near future talking about expansion, your responsibilities as an employer, and how you help transform your business.

• The expected profits are high - Our initial expectations are quite high given that we figure that there is a lot of demand for this type of service right now. Affiliate marketing is really taking off, so it only makes sense that more affiliates are going to want their websites to be SEO optimized, and link building is a big part of that.

As well, with low operating costs, we fully expect a profit margin over over 95% on every dollar made.

• The product is singular - Link building is something that a webmaster needs to do for every website that they launch. Do good work for one webmaster and don’t be surprised when they come knocking on your door the next time they launch a website. This could mean huge viral marketing and word of mouth advertising.

Repeat business guarantees longevity, especially online.

• The product is quick to deliver - Once you have mastered a method by which you can actually create the links, delivery becomes a matter of repetition. Since it becomes brainless, you could have clients done quite quickly as it becomes a matter of copy and paste.

Having a system in place saves time and maximizes revenue.

Expenses and Scalability:

Link building can be scalable, but at some point you will reach a saturation point of what you are capable of achieving in a day. Once this happens you are going to have to expand your operation, hiring employees and purchasing more equipment. However, you should also be in a position where you are taking in multiple orders in a day and doing enough volume to make expansion a logical option.

When you begin to expand your business it is unlikely that your primary expenses will need to increase. Your secondary expenses, such as employee wages or advertising, will have to increase, and with them your sales volume in order to maintain your profit margins.

Remember:
Your employees will be doing basic data entry, so there’s no reason that you need to be offering a premium salary for the job. A touch over minimum wage is all that would be required given that the job requires no skills outside of basic reading comprehension and typing.

You may also find it easier to offer an incentive for each client completed, as it will likely cause your employees to work harder in an effort to increase their inventive.

If you find that you are unable to keep up with demand for your business you would probably get by temporarily increasing the wait times of your services. This will keep income coming in while only diminishing the overall experience slightly for the user. In reality, so long as you maintain acceptable wait times (within two weeks or so) and inform your customers of those wait times, you’re doing just fine.

Profit Margins and Acceptable Pricing:

You want your profit margins to be as high as possible, and with a business like this (that is offering an intangible service), you will have to base your pricing on market rates and acceptable payment given the amount of time that it will take for you to actually complete the tasks you are being paid for. First things first, you need to assess the market. You can do this by browsing around related forums and message boards and see if any competing services are functioning, and if so, what they are charging.

Being reliable and punctual will allow you to command a price premium over your competitors, as being the cheapest game in town isn’t always the best route to take. Many people associate an incredibly inexpensive price with poor quality, so don’t be afraid to charge what you feel you are worth.

Your pricing will be based entirely around packages, since it is unlikely that someone will place an order on a “per-link” basis. It is recommended that you take some time to see how long it takes for you to build the links, and then work out a price based on the time.

In our experience it took us 20 minutes to complete 250 backlinks. We feel that charging the client $30 for those 250 backlinks is quite fair to both the client and to us (our income would be $90 an hour at those rates).

If your expenses total little more than hosting, anything above and beyond an order over $10 is profit, so don’t be afraid to go with the market on this and see how profitable it makes you.

Have something to say about this idea? Leave a comment- we’d love to hear it!